04/29/2012

Property and Law: Alternative Dispute Resolution (ADR)

Property and Law: Alternative Dispute Resolution (ADR)

Introduction

Currently,
negotiation,
mediation and
arbitration enable to resolve different conflicts. These have become
acceptable and inevitable aspect of creative lawyering in the 21st
century. As a result,
Alternative Dispute Resolution (ADR) processes are being applied in
different types of situations around the globe – all of these care governed by
either litigation or, in extreme cases, by warfare between countries[1].
Because it is considered as convenient way of resolving conflicts[2],
as a result, it is being used in different areas of economy,
security and social issues such as national and international peace and
order, environmental and
public policy, science and technology, sports, social development and
community-related issues, crime control and prevention[3],
and other related social and economic conditions, and more importantly in the
field of
property or real estate law.

This paper will focus on discussing ADR as a way of resolving
disputes and
conflicts which can arise in the Real Estate practices in the UK. Thus, it
will focus on analyzing the different advantages and disadvantages of individual
ADR process and connected it with the areas of
Real Estate Law and Practice in the UK.

What is
ADR?

ADR is the general term that is used in order to define a set of
different approaches and
techniques that aims to resolve disputes in a non-confrontational way[4].
These processes or approaches are used to resolve dispute in approaches and
processes that are short of, or alternative to, full-scale court processes[5].
Currently, ADR is no longer just a forceful option to litigation, but it is
considered as an obligatory consideration in the quest of claims before the
courts. Different case law shows that those who have unreasonably refused to
mediate may suffer from adverse cost effects of trial, even when they are the
successful party[6].

Basic ADR
Processes

There are different types and processes used in ADR nowadays, but
the most common are the arbitration and negotiation, mediation, arbitration and
conciliation.

Negotiation pertains on the contractually mandated good faith negations between
the parties. Commonly, a clause to the effect is offered for cooling off
period and put off arbitration before a specific time period has elapsed. This
can be effective in focusing the mind of the parties on the different advantages
of settlement during the initial states of the dispute rather than on the
different tactical advantages to be gained by the commencement of proceedings.
However, this process is subjected time limit in order to prevent an obstinate
party from arguing that the arbitration cannot be instigated because of the
continuing negotiations. With this, its common time period is 30 to 60 days. It
is important to take note that the issue whether the triggering of contractual
period will help to stop time running for limitation purposes, without express
agreement to that specific effect, is still uncertain[7].

Arbitration is a form of ADR which involve the formal submission of the dispute
to a non-judicial third person. The expertise of the arbitrator may be a
business professional, while the expertise of the judge in litigation is the
law. A person or entity may get into arbitration by way of contractual
agreement, by status, or even by court order. Commonly, the decision of the
arbitrator is binding on the parties. A contractual agreement to arbitrate a
dispute is the most common situation in the current world. This form of ADR is
commonly use in dealing with the development and sale of real estate,
particularly in the construction contracts[8].

It is
important to consider that a conciliator is also appointed by agreement between
the parties – conciliation ADR process – but they commonly take more complex
role in the negotiation process than the mediator and can make recommendations
on what he or she thinks as fair solution of the dispute. In order to do so,
arbitrator tends to see the parties involved privately. The limitation is that
in conciliation, the conciliator cannot force or require the parties to reach or
established a settlement and has no power to inflict a binding award towards the
parties[9].

The last
most common ADR type is mediation. In this process, an impartial third party is
employed by the third parties in order to act as a mediator but does not
generally make recommendations or even render decisions. Rather, he or she just
guide and support the parties to negotiate their own solution to the dispute.
The parties will be able to agree on whether or not the mediator is to consult
with them in separate manner or caucusing, jointly or both. In the end, the
mediator cannot force or require the parties to reach a given settlement, but he
or she may take a very dynamically influential approach[10].

Application of ADR in Real Estate Disputes in the United Kingdom

In general, there are different forms and types of disputes that
might arise in the property matter. This includes the rent review, service
charge, boundary dispute, misleading sales advert, consent refused for
assignment, failure to complete on sale, lease renewal, dilapidations and
negligent valuation. In addition, some construction matters can also be
encountered including property management and the relationship between the
general and sub-contractor, homeowner and contractor, etc. CPR Pre-action
Conduct Practice Direction encourage the application of ADR process before the
actual court proceedings in order to enable the parties involved to settle the
issues between them without the need to start lengthy and costly court
proceedings[11].
The next sections of this paper will tackle on issues that are related with the
application of ADR processes in the disputes which can be experienced in the
real estate cases in the UK.

Rent review is considered as one of the disputes in the real estate
market. It is important to take note that every rent review clause should
contain provision for the determination of a new rent by a third party in the
presence of dispute. The person to be appointed in order to settle on the
dispute will generally be a surveyor or valuer and the rent review clause can
include the specific requirements with regards to his or her experience. The
decisions of the High Court in McCarrick v The Gaiety (Sligo) Ltd. High
Court, 2nd April 2001, enables to show the different influence or
use of arbitration in real estate market disputes, particularly regarding rent
reviews. This can also be reviewed on the case of Warborough Investments Ltd
v. S. Robinsons & Sons (Holdings) Ltd (2003, which enable to show the
ability of the arbitrator to use his or her own expertise in valuation matters
in the different issues and circumstances of real estate disputes[12].
The result showed that the ability and skills of the arbitrators in deciding
regarding the reconsideration in each case enables to solve disputes. However,
it is also important to take note that there is a limitation on the power or
authority of arbitrators in decision-making process. There are cases which show
that if the arbitrator draws on the knowledge outside the particular field, then
he or she is no longer assuming the role of an impartial arbitrator but that of
an advocate[13].
Particularly, the result of Sokratis Rokopoulos v Esperia S.P.A. (1987) 1
Lloyd’s Reports 456 shows that:

“He can and
should use his special knowledge so as to understand the evidence that is given,
the ledgers of the clerks, the usage of the trade, the dealings in the markets
and to appreciate the worth of all that he sees upon a view, but he cannot use
his special knowledge, or at any rate he should not use it, so as to provide
evidence on behalf of the defendants which they have not chosen to provide for
themselves, for then he would be discarding the role of an impartial arbitrator
and assuming the role of advocate for the defaulting side. At any rate, he
should not use his own knowledge to derogate from the evidence of the
plaintiffs' experts without putting his own knowledge to him and giving them a
chance of answering it and showing that his own view is wrong... ...so in
assessing rents, an expert arbitrator can rely on his general knowledge of
comparable rents in the district. But if he knows of a particular comparable
case, then he should disclose details of it before relying on it for his award”.

The major
advantages of this process are: speed, continuing relationship of the parties,
abilities of the parties to choose the form of decision making process; privacy
of award and finality. On the other hand, the main disadvantages of this
process are: it will not mean cheaper or less time consuming, the award is
reviewable by the competent jurisdiction of the court, thus the decision is
considered at the trial division level and the difficulty of continuing effort
due to commitment of the arbitrator. As have mentioned in the first part of the
paper, the roles and responsibilities as well as the authorities and powers are
limited, thus, it cannot be affected in some aspect of the dispute.

Mediation
is considered as the process where in the two or more parties in dispute employ
or assign an independent third party in order to help them out in accomplishing
a discussed agreement in order to determine their differences. In details, the
third party does not inform and notify them what to consent and does not sit in
verdict ahead of them, thus he does not work as an expert. Instead, he or she
helps out the parties in establishing or thinking about their own decision. With
these, the main characteristics or the primary attribute of the process is its
non-binding and disregarding the issue of prejudice, bias and maintain
confidential procedure, which enables the third party to act as a catalyst. In
addition, mediation is deliberate because there is no pressure or force upon the
parties to partake. It is non-binding only because the parties that are involved
can withdraw from the process at any time they want before the final step or
settlement has been achieved. However, it is important to consider that once
that the settlement has been obtained, recorded and signed by all the parties
involved, then it becomes a binding contract and indicates that the dispute is
at its end. Because litigation may already have been set in train, it is
universal and general for the parties to agree or approve in order to be
attached or included to the contract. It is considered as bias-free or free from
any prejudice due to the fact that there are nothing said in the duration of the
mediation process, which is considered and connected to the subsequent
litigation. Above all, it is confidential due to the fact that parties have
selected to resolve their dispute away from the eyes of the public.

Unlike
other ADR processes like arbitration and litigation, mediation enables the
parties to maintain their control based on their demands or needs regarding the
different alteration in the development of the discussions. Therefore, mediation
helps in order to restore broken communication between two companies or
organizations, at the same time, mend those broken business relationships[14].
Primarily, the mediator is the one responsible in making sure that the expert
evidence needed for the dispute reconciliation will be gathered and provided
completely. Furthermore, it is important to be independent and high of integrity
and honesty by ensuring that that personal opinions and experience will not
cause bias perceptions and decisions. In the end, the primary role of the
mediator is to present and explain the different facts and assumptions that have
been gathered from the materials and other documents that have been analyzed and
evaluated. Therefore, mediation process is more detailed than the first process[15].

Mediation can help in order to consider in-depth analysis of the situation. In
the Basingstoke and Deane B.C. v. The Host Group, [1988] 1
W.L.R. 348, according to Nicholls L.J.:

“There is
really no dispute that the general purpose of a provision for rent review is to
enable the landlord to obtain from time to time the market rental which the
premises would command if let on the same terms on the open market at the review
dates. The purpose is to reflect the changes in the value of money and real
increases in the value of the property during a long term. Such being the
purpose, in the absence of special circumstances it would in my judgment be
wayward to impute to the parties an intention that the landlord should get a
rent which was additionally inflated by a factor which has no reference either
to changes in the value of money or in the value of the property but is
referable to a factor which has no existence as between the actual landlord and
the actual tenant, i.e., the additional rent which could be obtained if there
were no provisions for rent review”[16].

In the end, this process can help in order to save time and money in
significant manner. Furthermore, it can also be useful process in managing the
expectations of the clients. It can also help in order to lessen and remove the
risks that are connected by trying the cases in the front of the jury. It also
enables the parties to maintain confidentiality, because the process will be
done just between the two connected parties. Mediation can also help in order to
contribute to the overall process by expressing their opinions and reactions
which will be able them to be heard, thus help to resolve some problems related
to emotions. With that, it can help in order to enable the parties involved as
well as the mediator to practice creativity in the process of establishing the
resolutions, at the same time, it can concur to the relief that the court could
never award. Based on these, it can help to motivate the parties, because they
are more likely to cooperate and follow agreements because they have been part
and very cooperative to the entire process. Above all, there is no real
disadvantage and problem with mediation due to the fact that most of the cases
reconcile and even those that don’t, enables to realize the benefits including
the appreciation and recognition of each party’s interests and perceptions,
motivation, approval, future long relationship and even the process of lessening
the issues.

References

A
Fiadjoe, Alternative Dispute Resolution: A Developing World Perspective
(Routledge Cavendish, United States 2004)